advantages of straight salary plan advantages of straight salary plan

O True O False. When more than one individual works together to make a sale, the selling process is described as: You have just been promoted to the position of sales manager. Companies with employees who work in teams, spend a lot of time on projects, or whose performance is difficult to measure might also be better suited for straight salary compensation. Business is going well for Park N Fly , the company that operates remote parking lots near major airports. In some organizations, selling is a collaborative effort. Recommend a plan to the board of directors. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. The different types of compensation include . A straight salary can greatly benefit someone who is transferring to a new territory. You can tweak the budget annually by deciding whether the business has flourished enough to offer merit raises. Whos using straight hourly compensation? Straight salary plans often do not provide strong incentive for extra effort. Which of the following accurately describe per diem expense plans? In this compensation structure, the employee receives a set hourly rate, plus a percentage of their sales. 2. Your email address will not be published. Provide a mix of both compensation and noncompensation rewards comparable to other firms. The advantages of paying employees a straight commission include the fact that it provides direct motivation to sales representatives to sell more products and services so they can earn more. One thing to keep in mind: If the commission rates are too low, they may seem disingenuous and could decrease morale or cause bitterness among employees. You were given the mandate by your boss to change the compensation plan so that the total salesperson compensation (salary plus commission) is lowered. 6. But straight commission method provides sufficient incentive to the salesmen to do hard work. A straight salary can greatly benefit someone who is transferring to a new territory. Fresh business resources are headed your way! A common salary-to-commission ratio is 60:40 (60 percent fixed / 40 percent variable). Your national sales force is divided into eight regions, though the Mid-Atlantic region is currently understaffed (sales volume there has always been low). 5 Park N Fly presently has net income of $3.5 million and 1 million shares of common stock outstanding. The commission can include (but is not limited to) a percentage of personal sales, a percentage of team sales, bonuses, or overtime pay. Are they just trying to pay their way through college? This type of compensation is often used for entry-level jobs or employees working in restaurants, retail, or the service industry, usually in non-management roles. 2. nonfinancial reward: The Million Dollar Roundtable designation in the insurance industry is an example of this type of The tools and resources you need to get your new business idea off the ground. Straight salary method of remuneration is found suitable and is usually adopted under the following circumstances: 1. Running payroll for hourly employees, as opposed to salaried employees, can also be significantly cheaper, making it easier for companies to hit financial goals. A salesperson makes the initial contact and sets the stage for the sale, while others such as product experts or management personnel are brought in to help him close the deal. An employee who agrees to this type of compensation will receive a base salary along with an additional bonus if performance hits or exceeds earning goals. 3. I thought wed follow up on that post by exploring the six different types of compensation plans in depth. Employees like it because it rewards those who work hard. 8. It is a highly attractive model, especially to start-ups who are seeking to penetrate a specific territory. Which of the following statements about a straight salary compensation plan is true: A major limitation of straight salary compensation plans is that financial rewards are not directly tied to any specific aspect of job performance. 4. That means, there will not be much bad debts. While there are no real downsides to this type of plan, organizations should be mindful of several things: This requires a solution that benefits both employee and employer. Design the plan centrally and dictate to local countries. In territory value compensation (TVC), payment is calculated based on the territory volume at the end of a period. We dont want you to miss anything. 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All of the following are typical reimbursable expense items except. Some people won't work for anything other than a fixed salary. When the salesmen are required to create markets for a product. pharmaceutical sales) is the most common type of sales process used. The location selection is critical, and with the potential for 4,000 new skilled blue-collar jobs on the line, virtually every city in western Europe is actively bidding for BIA's business. Among the drawback(s) you will discuss include: You have read a "want ad" in the latest edition of Marketing News. \underline{\ \ \ \ \ \ \ \ \ \ \ \ }&& \underline{-3,000} && \underline{\ \ \ \ \ \ \ \ \ \ \ \ }\\ \text{Winning Team} & \text{Points} & \text{Losing Team} & \text{Points} & \text{Winning Margin}\\ Straight Salary Compensation. Which one of the following statements regarding global compensation is false? 5. It has lower turnover rates. The ATO considers this $80,000 taxable income. In this type of compensation, income is solely based on sales made. According to the Customer-Product Matrix, sales positions which focus primarily on New Business Development require a greater proportion of __________ in the compensation plan than those sales jobs in the lower left-hand quadrant (Account Management). The earnings of a person who is working as an independent contractor are subject to self-employment tax.. A major objective of a well-designed compensation package is to: 1. Employers have to think about who their target employee is and what that employee is looking for. Working as a contractor definitely has its benefits. Everything you need to prepare for and have a successful holiday season. Salaried employees receive an equal portion of their annual compensation every week. Compensation plans, once set, do not need to be evaluated to determine if it will negatively affect salespeople's wages and total costs. The sales numbers are added up and all commissions are split equally among all sales professionals. Tips may be considered part of the employees wages, but the employer must pay no less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the hourly minimum wage. It is often used in direct sales industries and multi-level marketing (MLM) firms that work with independent contractors. Straight salary method of remuneration Meaning, Suitability, Advantages, Disadvantages. You gain authority, prestige and responsibility. Cost of Administration: The cost of administration of straight salary plan is less than that of straight commission plan. Is your team struggling with burnout and a lack of fulfillment at work? manner. \text{Florida State} & \text{75} & \text{Wake Forest} & \text{70} & \text{5}\\ Celebrating the stories and successes of real small business owners. \text{Duke} & \text{85} & \text{Georgetown} & \text{66} & \text{19}\\ Once the person has established himself in the area, the company can switch to performance-based salary. What was the difference between the day's high and low for one share of Southern Copper? The nine different types of compensation packages include: This type of compensation refers to a set annual amount, divided by the years pay periods to get a pay rate weekly, every two weeks, or monthly. scores more than 90 points. Prepare an analysis to determine which plan will result in the highest earnings per share of common stock. Currently editor at The HR Digest Magazine. How to find funding and capital for your new or growing business. 6 Different Types of Compensation Plans and Benefits - The HR Digest As defined by the IRS, independent contractors are people who are in an independent trade, business, or profession in which they offer their services to the general public. Employees and independent contractors are mutually exclusive, as a person is either one or the other. \end{array} they contribute little to company loyalty, resulting in potential salesforce control problems. In many companies, basics plus bonus-based compensation plans are used as a way to motivate employees. In order to "weather the storm," the best course of action among those presented below is to: Raise commission rates on higher margin products in all regions in order to boost sales. Required fields are marked *. \begin{array} {c} Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. Defined by the FLSA, tipped employees are those who receive more than $30 per month in tips. For example, since the pay of salaried salespeople is not directly related to performance, some of them may not make all of their calls or give the firm "a full day's work for a day's pay." \\ \text{Arizona} & \text{90} & \text{Oregon} & \text{66} & \text{24}\\ Last week's MPG for 35 student vehicles (xmin=9.4,xmax=38.7)\left(x_{\min }=9.4, x_{\max }=38.7\right)(xmin=9.4,xmax=38.7). Efficiency: Straight salary method does not distinguish between efficient and inefficient salesmen. Explore the trend of creative job titles in the job market and how they are reshaping the way we view and define roles in the workforce. 1. Total sales for the territory are then split among the sales reps in that territory. A regular and stable income can do much to develop a loyal and well-satisfied salesman. Security and collaboration: The straight salary plan provides a more stress-free working environment for the salespersons. Employees who like working in sales but also in a team environment will be attracted to such compensation, as it takes the pressure off the individuals performance. Which of the following is not one of the desired outcomes of an optimal reward system? Salary plus Commission This is one of the most reliable types of compensation plans. In commission only jobs, companies offer a safety net in the form of draw against commission. The company pays its salespeople a set amount known as a pre-determined draw at the beginning of each pay period. 9. \underline{\underline{14,800}} && \underline{\underline{\ \ \ 2,500}} && \underline{\underline{90,000}} \\ \\ \\ \\ Straight Salary Straight salary sales compensation plans aren't very common, but they do have a place in some organizations. Operating costs are minimized during slack selling periods. We provide third-party links as a convenience and for informational purposes only. \text{ } & \text{ } & \text{52-Week} & \text{52-Week} & \text{ } & \text{ } & \text{Sales} & \text{ } & \text{ }\\ The workplace catchphrase you need to know. Benefits or Advantages A regular income gives the salesman a good degree of security. In this, salespeople continue to receive a commission as long as their accounts are generating revenue for the employer. \text{Purdue} & \text{76} & \text{Michigan State} & \text{70} & \text{6}\\ By accessing and using this page you agree to the Terms and Conditions. This type of compensation refers to a set hourly amount without additional performance-based income. 30,000 && 4,000 && 75,000\\ Help Miller rank the top three cities that BIA should consider as its new site for servicing aircraft. Good salespeople can continue to receive residual commission ever after they leave the company through negotiation. And while some competition in the workplace is good, this kind of motivation to not only succeed but to survive can sometimes breed distrust and a lack of camaraderie. The company uses a combination of brokers and independent sales reps. What kind of a compensation program would they most likely to use for their salespeople? On the other hand, TVC can lead to hostility between employees if they dont feel the workload or efforts of all representatives are balanced. 3. Melissa Skaggs shares the buzz around The Hive, Straight salary|Salary plus commission|Hourly|Hourly plus commission |Commission-only|Territory volume|Profit margin/revenue-based|Residual commission|Contractor commission|Hourly vs Salary. The most commonly used definitions of motivation include these three dimensions: Use the table below. __ A mutual fund that purchases their compensation plans to recognize team performance? Copyright 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. On the other hard, straight commission method does not give the management sufficient control over the salesmen. What is important here is building a close relationship with the retailer and satisfying the customers needs. Since no one is taking out taxes for them, it is up to the contractor to budget and remit taxes quarterly to prevent a fine and a huge tax bill at year-end (April 15). In case the salesperson shows high sales performance, the firm increases its salary. For you as a business owner, paying fixed salaries allows you to precisely know how much you're going to pay out each month in labor costs and to budget accordingly. According to compensation surveys, ales managers typically earn less than the top reps in their district when sales reps are on an incentive-based plan. In designing plans one must balance the goals of the firm, as well as the needs of the sales force and customers. Some of these jobs also have flexible schedules, which can be beneficial to employees. -2,000\\ except: make it easy enough to allow for a majority of the salesforce to win. MKGT 637 Chapter 8 Flashcards | Quizlet Terms and conditions, features, support, pricing, and service options subject to change without notice. \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{\ \ \ \ \ \ \ \ \ \ \ \ \ \ } && \underline{-3,000}\\ Such positions might include retail sales, restaurant employees, barbers and cosmetologists, and customer service reps. Purely paid-by-commission plans can create an unfriendly, competitive environment within teams. As the name suggests, straight salary compensation is just what you would expect. 2. As salesmens remuneration is not related to the volume of sales made by them, this method imposes a serious burden on the earnings of the firm in terms of sales. This type of compensation is well-suited for employees who work in a team-based culture. Under Straight salary method, a salesman is paid remuneration on time basis. The tools and resources you need to take your business to the next level. Ultimately, you have to determine the method of pay that your company can best manage and to weigh the advantages and disadvantages of offering a fixed salary. Relevant resources to help start, run, and grow your business. After initial investigations by Holmes Miller, head of the Operations Department, BIA has narrowed the list to 9 cities. Changing from a straight salary plan to a combination salary plus commission plan provides a number of benefits. Which, if any, of the following sources available will help you in your task? Control over Salesmen: Straight salary plan gives the management sufficient control over the salesmen. bell-shaped distribution. estimate the percentage of all NCAA games in which the winning team scores 84 or As the remuneration of the salesmen under this method does not depend upon the volume of sales made by them, the salesmen will not be reckless in increasing their sales by selling to every customer on credit. Provide an opinion of which type of compensation plan you would prefer as a professional salesperson. Per the IRS definition, the contractor is in control of how the work gets done, so there is a lot of freedom. Advantages. provide salespeople with trips and other rewards. Companies often feel they can justify a lower salary or rate if they include a more robust benefits package. The salesperson experiences a high level of security with a salaried sales position. 1. By creating a feeling of security in the minds of the salesmen, it maintains high morale among the sales force. 5. Person A pays over $18,000 in tax and receives a net income of around $62,000. virtually automatic, this form of commission rate would be appropriate: An example of a selling situation requiring a commission split would be. Tax basics you need to stay compliant and run your business. Whos using straight salary plus commission compensation? Resources to help you fund your small business. Employees earning salary plus commission will have higher income tax rates than a self-employed agent. Although many customers expect after-sale service on repair parts and delivery, compensation programs based on straight salary are not likely to encourage these important follow-up activities. This type of sales compensation plan is employed in companies which prohibits direct sales. Commission-only compensation plans are usually simpler and easier on payroll than compensation types combined with hourly or salary pay rates. https://quickbooks.intuit.com/r/payroll/employee-compensation-benefits-guide/. Disadvantages of straight salary compensation Some disadvantages of straight salary compensation may include reduced retention and high turnover if employees don't see opportunities to increase their pay. Although quite popular, salary compensation plans have some disadvantages. Which of the following is/are most likely to be among them? __________ tends to help give the sales force the needed push to sell complex products or services and can be used to redirect salesperson efforts toward specific product lines; under this plan administrative costs tend to be high. \textbf{\textsf{Accounts}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Murray Kiser,}} && \textbf{\textsf{Fees}} \hspace{6pt}\\ Such a plan is quite common in the services industry as well as in the industrial goods sector. Companies that pay their employees using PMR-based compensation will want to offer additional benefits to make up for their potentially low liquidity. The introduction of HR technology has revolutionized the way HR departments operate. compensation plans are used as a way to motivate employees. Everything you need to start accepting payments for your business. TVC is most often used in team-based corporate cultures. While in certain compensation plans, the salespersons receive benefits on accomplishment for specific tasks (e.g. determine the relative amounts to be paid in salary, commission, and bonus. Using the mean and standard deviation found in part (a), At the end of the pay period, this prepayment is drawn from how much the salesperson earned in commissions. The salary-plus-commission pay structure also encourages employees to set more aggressive sales goals. This type of compensation plan is every salespersons dream. As a result, salaried workers often dont track hours worked. It tends to eliminate or reduce high-pressure selling, i.e., pushing items which are not needed by the customers. \text{Kansas} & \text{78} & \text{Colorado} & \text{57} & \text{21}\\ ____________ is the easiest plan to administer and budget for. All of the above. Each line designated by a number indicates the effect of a transaction on the equation. Wage caps are used by some firms to prevent salespeople from making too much money. A salesperson who is intrinsically motivated. Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired. For a new salesperson, a salary provides a steady income during the training period when he is still learning the sales methods and products of the company. Motivated salespeople may search for this type of income, knowing that if they work really hard early on, they can work less later and still make the same income. Talent poaching occurs when an employee is recruited away from one company by another. He holds a Bachelor of Science in marketing from York College of Pennsylvania. You are the sales manager of a large, multi-product company. more points. Let's explain the benefits with a clear example of an unpackaged salary versus an FBT exempt salary package. 4. Salesmen Reward: Under the straight salary method, salesmens rewards are not matched with their efforts. If you choose this plan, you'll pay your reps using a mix of base salary and performance-based rewards. View the full answer. It is not clear that offering unlimited opportunities to earn higher pay will always be an effective method for continued salesperson motivation. However, a straight salary plan also has its own advantages. A salesperson who is extrinsically motivated, is motivated by the rewards that the job provides, Reward system management involves the selection and utilization of organizational rewards to. Advantages of straight-salary compensation plans include all of the following except. One benefit, from the employers perspective, is the company only pays commissions when the top line improves, so its beneficial from a profitability standpoint.